- A combination of factors did not help the USD / CAD to register a significant recovery.
- Falling US bond yields and prevailing risk appetite kept USD bulls on the defensive.
- A modest rebound in oil prices sustained the loonie and helped limit the rise.
The pair USD / CAD it extended its sideways consolidation price action throughout the early American session and remained confined to a range just above 1.2050.
The pair, so far, has failed to register a significant recovery and remained near the lowest level since May 2015 touched last week. The prevailing bearish sentiment around the US dollar, coupled with a rebound in crude oil prices, limited the rise for the USD / CAD pair. That said, the relatively poor selling conditions prevented traders from making further bearish bets and helped limit the slide, at least for the time being.
The USD struggled to capitalize on Friday’s attempted recovery from multi-month lows, but was met with fresh supply amid the ongoing slide in US Treasury yields. Aside from this, sentiment Underlying bullishness in global financial markets also acted as a headwind for the safe-haven dollar. The latest comments from Fed Governor Lael Brainard did little to give the USD bulls a break or move the USD / CAD pair.
Answering questions at a cyber conference, Brainard said the United States is in the midst of an unprecedented rebound in the economy. Prices are recovering from pandemic lows and the increases are related to increased demand. He further added that the Fed has the tools to guide inflation back down if price pressures persistently move above our targets.
On the other hand, the loonie remained well supported by a more aggressive Bank of Canada. It is worth remembering that the BoC reduced its weekly asset purchases at the April policy meeting and also advanced the guidance for the first interest rate hike to the second half of 2022. This, coupled with a rebound in the prices of the oil, provided an additional boost. to the Canadian dollar pegged to commodities and did not help the USD / CAD gain traction.
From a technical perspective, the range-bound price action could be classified as a consolidation phase after the recent slide. The lack of buying interest suggests that the short-term downtrend could still be far from over and that the path of least resistance for the USD / CAD pair remains to the downside. Therefore, any rally beyond 1.2100 could be seen as a selling opportunity and risks fading away fairly quickly.
Technical levels
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